The Greek cabinet have approved a draft bill committing the country to reforms required by the EU and the IMF in return for a new €130bn bailout Athens needs to avoid a messy bankruptcy, government officials said.
"It was approved," a minister who took part in the cabinet meeting said.
The bill is scheduled to be voted in parliament on Sunday, which would take Greece one step closer to getting the loan.
The EU also wants Greece to identify a further €325m of spending cuts and clear commitments by main party leaders that the reforms will be implemented.
Earlier Greek Prime Minister Lucas Papademos warned that Greece risks "uncontrolled chaos" if it defaults.
Mr Papademos said he was prepared to push through new austerity cuts for the €130bn rescue package.
He said: "A disorderly default would plunge our country in a disastrous adventure.
"It would create conditions of uncontrolled economic chaos and social explosion ... this is an hour of historic responsibility."
Mr Papademos also said that ministers who disagreed with new spending cuts and austerity measures could not stay in government.
Discontent leads to cabinet resignations
A number of cabinet members have resigned over the European Union and International Monetary Fund demands for yet more pay, pension and job cuts in return for the financial rescue.
Deputy Foreign Minister Mariliza Xenogiannakopoulou became the second from the majority Socialist party to resign, after Deputy Labour Minister Yiannis Koutsoukos did so yesterday.
The right-wing LAOS party's transport minister and deputy ministers for merchant marine and agriculture also resigned.
However the Prime Minister did react immediately to the resignations.
"There will be no reshuffle today" said a government official who declined to be named.
The leader of the LAOS party, one of Greece's coalition parties, said that he cannot support the bailout agreement.
"I explained to the other political leaders that I cannot vote for this loan agreement," George Karatzaferis told a news conference.
Mr Karatzaferis's party has 15 deputies in the 300-seat Greek parliament, meaning a refusal to vote in favour would not prevent the bailout agreement from being passed in parliament.
Greece faces bankruptcy at the end of March because it must repay €14bn in debts but it does not have the money.
Call for technocrat cabinet
The LAOS leader also asked for a reshuffle and a cabinet of technocrats.
He added that the IMF's top official for Greece, Poul Thomsen, should be declared a ''persona non grata'' in the debt-choked country.
Greece's EU and IMF lenders are deeply unpopular among ordinary Greeks for painful austerity measures they have demanded in exchange for bailout funds to prevent the country from defaulting on its debt.
Finance Minister Evangelos Venizelos has told the nation it has to decide within days whether to take the pain and stay in the Euro or not.
Meanwhile, striking Greek workers denounced a new wave of austerity measures as a demand too far by the IMF and EU.
Clashes in central Athens
Violence broke out as thousands took to the streets of the capital after unions launched a two-day general strike against the planned austerity measures.
Police said around 7,000 people took part in the demonstration.
Scores of youths, in hoods and gas masks, used sledgehammers to smash up marble paving stones in Athens' main Syntagma Square before hurling the rubble at riot police.
Police responded by firing teargas at the protestors.
Another 10,000 Communist supporters held a separate, peaceful march.
The country's two biggest unions stopped railway, ferry and public transport schedules, and hospitals worked on skeleton staff while most public services were disrupted.
The biggest police trade union said it would issue arrest warrants for Greece's international lenders for subverting democracy, and refused to "fight against our brothers".
